I argued that both Intel's and ARM's shares were a good buy because both could prosper despite the rivalry.

Except, Intel's sharp rise has been met by a nearly 8% decline in the shares of ARM.

That Intel should prove the stronger of the two, at least for the moment, seems only fair considering that its shares, trading at just 9.8 times next year's projected $2.56 per share in profit, remain an exceptional bargain.

ARM stock fetches a nosebleed price/earnings multiple of 40 times, and the market has decided to hand the laurel to the more efficient stock.

What I failed to realize was how deeply Intel would become a haven from the rest of the semiconductor stock universe, a calm port in a ferocious storm.

The entire supply chain is trying to get rid of what it already has before taking orders for new chips.

I can't prove it, but some of this no doubt has to do with the failure of some very high-profile gadgets this year. Tablet computers have been all the rage, but aside from
Apple's
AAPL -1.5351744876157316%Apple Inc.U.S.: NasdaqUSD124.43
-1.94-1.5351744876157316%
/Date(1427835600323-0500)/
Volume (Delayed 15m)
:
40410221AFTER HOURSUSD124.45
0.0199999999999960.016073294221650727%
Volume (Delayed 15m)
:
1481444
P/E Ratio
16.657295850066934Market Cap
736073426681.742
Dividend Yield
1.5108896568351684% Rev. per Employee
2153110More quote details and news »AAPLinYour ValueYour ChangeShort position
(AAPL) iPad, they haven't sold in high numbers.

All these tablets run chips that use designs from ARM, so some of the disappointment has inevitably reached the chips market. I wrote about that danger a bunch of times this year, starting in February in a piece called "The Year of Too Many Tablets?" It just took longer than I expected for the day of reckoning to arrive.

Other factors have roiled the chip market, such as massive floods that began in Thailand in July and that have shut down quite a bit of the electronics production that feeds the PC business. Texas Instruments, too, said that the economic worries that have roiled Europe have contributed to a slowing of chip orders in numerous industries.

Given ARM's broad exposure to the chip business—it licenses its designs to numerous semiconductor makers—the company is a barometer of overall chip health, and so it's taking that broad weakness on the chin.

Intel's failure to get its chips into those failed tablets certainly has turned into a virtue

Daniel Berenbaum of MKM Partners, who has a Buy rating on Intel, tells me that it has diverged from the fate of other semiconductor makers because it is identified more with specific tech trends, and not with the economy overall.

"Semiconductors are a GDP plus 100 basis points business," Berenbaum tells me. Translation: Chips are so prevalent these days that they can't escape the ups and downs of total gross domestic product growth.

Many of these tech titans are direct customers of Intel, Berenbaum points out. They don't buy servers the way a small business might, by browsing at Best Buy. They call up Intel and put in an order for microprocessors with which to build their own servers.

In other words, it's clearly paying off to be the odd man out in the tablet frenzy.

Intel has trounced the other chip stocks, rising 18.9% for the year, versus an 8.8% decline in the Philadelphia Semiconductor Index.

Those other chip stocks generally fetch higher multiples than Intel's—TI has a P/E multiple of almost 15, for example. Those stocks demand that you believe that "there will be growth in the spring," as the gardener Chance memorably said in Being There.

The folks at boutique research firm Blue Fin Research Partners, specifically Barry Danaher and Paul Peterson, are skeptical. As they wrote in a note Thursday, their recent jaunt through China suggests that domestic consumption is breaking down in that country in a big way.

A slowdown in the world's second-largest economy can't be good for chip demand, and they see a protracted turnaround in semiconductor fortunes.

A word of caution to the cynics: The mood of the industry could brighten next month as the Consumer Electronics Show in Las Vegas gets under way. It's a gadget love-fest in which hope springs eternal, sometimes bringing stock prices with it. So it's too early to abandon the sector entirely.

One good idea is to look beyond the chip makers to some of their suppliers. Longtime tech observer Paul Wick of J&W Seligman likes the shares of
SynopsysSNPS -0.2154243860404998%Synopsys Inc.U.S.: NasdaqUSD46.32
-0.1-0.2154243860404998%
/Date(1427835600230-0500)/
Volume (Delayed 15m)
:
814438AFTER HOURSUSD46.32
%
Volume (Delayed 15m)
:
166938
P/E Ratio
28.072727272727274Market Cap
7134150094.26209
Dividend Yield
N/ARev. per Employee
223999More quote details and news »SNPSinYour ValueYour ChangeShort position
(SNPS), which is one of the leading vendors of the software used to design chips. Full disclosure: His fund is the second largest holder.

Wick suggests that the valuation looks good, following the recently announced purchase of smaller competitor
Magma Design Automation
(LAVA).

At a recent price of $28.02, if you back out $3.50 per share in cash after the deal, Synopsys shares would trade at 10.4 times the $2.35 per share in profit the combined company may earn next fiscal year.

That seems a small price to pay, thinks Wick, for the company that is selling the tools to design the chips that will power the future.

Help from Abroad

The tech-heavy Nasdaq Composite jumped 1.9% on Friday, to 2646.85, fueled by optimism about a solution to Europe's woes.